Top tips for a successful M&A transaction

Completing a successful merger or acquisition is without a doubt one of the most challenging tasks a business can undertake. Cultural, financial, regulatory and strategic factors alike each require time and consideration from the moment a deal is considered until the final approvals have been received.

For Jason Varney, partner at Thomson Snell & Passmore LLP, which advises a variety of clients on the M&A process, it is getting to work with ambitious, growing businesses to navigate these challenges and get the deals over the line which makes his role so exciting.

“They’re passionate about what they do, they want to grow their businesses and they’re excited about what that means,” he said. “And you’re not talking to a manager who’s just stepped into the business, you’re speaking to someone who wakes up breathing their business and enjoys every day of it. And they really care about the people who have been with them from day one.”

A great example of this was experienced recently by Varney and the Thomson Snell & Passmore team when they advised the high-profile dual swoop made by the MGA Landmark Underwriting. Landmark is a classic illustration of a team that looks after each other, he said, and working with them to complete those two bolt-on acquisitions and support their growth ambitions was really exciting.

From his time in the market advising insurance businesses on M&A transactions, Varney has learnt to recognise the early signs of a successful deal –  a skill that goes hand in hand with his approach of understanding both sides of a transaction. And whether he’s supporting the buyer of an insurance broker, an MGA or a mortgage advisor, he said, that method remains the same – of identifying his clients’ ambitions but also what the vendor is looking to achieve.

“Because they’ve got their own ambitions,” he said. “Do they fully exit and want to go and drive motorbikes around the Bahamas? Do they want to be involved in the business going forward? Do they want to reinvest because they see the growth of the business?

“Because we do a lot of buy-and-sell-side in this space, we get a really lovely overview of what people want to achieve and what their pressure points are. I think as a firm that helps us to get the best result for our clients. It’s not about winning points, it’s about making sure that everyone walks away happy with the deal they’ve done.”

Varney, who moved across to Thomson Snell & Passmore almost two years ago, has enjoyed a career filled with variety, with roles at RPC, Ebury and HSBC, and each next step in his professional journey has brought with it new insights into what it takes to make a deal succeed. Sharing some of his key recommendations for firms exploring the M&A route, he emphasised the need for flexibility.

“A transaction is always more successful if everyone around the table is willing to be flexible,” he said. “I’ve worked with businesses and some of the big financial institutions in the past who have their set goals and objectives and are clear about what they want to do. And sometimes deals fall over because it’s not quite what they’re expecting, or things change through the transaction or through due diligence.

“Sometimes things come out of the woodwork that they weren’t expecting and if the people who are moving the deal forward aren’t flexible and they’re stuck in those guidelines, the deal will fall over. But if you have a client who’s willing and open to new opportunities, who knows that not everything’s going to go their way… then you can usually tell that the deal’s going to be successful.”

It’s not an approach shared by everyone, Varney said, and some lawyers will tend to be very aggressive in their stance on negotiations. Personally, however, he bears in mind that with the transaction done, the work of the M&A lawyer is complete and the rest is over to the respective businesses. It’s the people on either side of the table who then need to work together, which is why it’s so important they foster a good relationship before the sale completion.

That flexibility piece is so critical to both sides of the transaction, but specifically on the sell-side of the equation, a key piece of advice from Varney is to have your house in order. Every business, whether it’s a £2 million firm or a £100 million turnover business has skeletons in its closet, he said.

“If someone says to us they want to sell their business, we go through the exercise of essentially kicking the tyres,” he said. “Do you have this document? What litigation do you have? Where are the skeletons? And be open about it, every business has them but the key is having a plan for dealing with them and being honest about those concerns with whoever’s buying you. Because usually, if you are upfront about it, then there is a way through it.”

The insurance deals that he sees fall over, Varney said, are those where concerns come to light at the last possible moment and nobody has a plan for how to mitigate them. When people are honest and open, it says a lot about the culture of your business and your team and makes it much more attractive for a buyer to negotiate a pathway through any challenges.

On the buy-side of the equation, he said, his key advice is to take advantage of the fact that while insurance is a large market it’s also a very close-knit one in which everybody knows each other. When considering making a purchase, therefore, a potential buyer should ask around the wider market and enter into discussions with businesses or professionals that know the potential vendor.

“Have a conversation and get a feel for who they are and how they come across when they’re not presenting as a company that’s ready to buy,” he said. “And people have stories, and sometimes I’m sure they have horror stories, but you get a good feel for the business without having to go too deep into the tax and financial and legal aspects of the business.”

Last, but certainly not least, on his list of recommendations for firms is the need to work with the right partners. From his time spent abroad, he said, he has seen that UK law and UK lawyers have set the benchmark for legal contracts, and having the right advisors on an M&A journey is critical. All advisors have reached a standard of technical ability -, what sets the right advisors apart is that they will be people you can get on with, who can be honest with you, and who will enlist their expertise and intuition to bring a deal to a satisfactory conclusion.

“Also, involve advisors early,” he said. “Sometimes we’re asked to be involved on a deal that’s quite far advanced and we start asking ‘have you thought about this, have you thought about that?’ And they haven’t. So, then it’s about unwinding what they’ve already agreed to get even the initial conversation in place. As a firm, we’re always happy to just speak to people as you’ll get a different viewpoint or steer on what the key concerns are. But having a good team that you really trust is just so important.”

This article first appeared in Insurance Business.